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First Homebuyers to Help the Property Market Grow as it Returns to ‘Normal’

WITH each day, it seems analysts and forecasters change their minds about where the Australian property market is headed.

Some predict a property price crash, while BIS Shrapnel has just released its latest findings Residential Property Prospects, 2011 to 2014 report, in which it predicts steady prices throughout 2011, with some capital cities even showing moderate price growth over the following two years to 2013.

According to the report in 2010/11 the residential market was hit by a ‘perfect storm’ of falling first-home buyer numbers – which flowed through to weaker upgrader demand, stalling economic conditions and increases in interest rates. All of which coincided to dampen purchaser demand.

BIS Shrapnel senior manager and study author, Mr Angie Zigomanis, said he believed the main reason for this was the substantial ‘pull forward’ of first-home buyers into 2009 due to expiring government incentives, rather than higher interest rates.

He believed this then flowed through to weaker upgrader demand as there were fewer purchasers in the market for their existing dwellings.

“These movements in the property market coincided with the economy stalling due to government stimulus tapering off, and the resources boom yet to gain traction,” Zigomanis said. “The combination of weaker demand, a more uncertain economic outlook, weak consumer confidence and prospects of further interest rate rises has resulted in weaker house prices.”

Mr Zigomanis also believes first home buyers will return to long-term averages as the ‘pull forward’ effect is worked through, and the spectre of higher interest rates will not keep them away either.

“Potential first-home buyers will not stay out of the market forever,” Zigomanis said. “At some point many will reach a life stage where they will want their own dwelling. If higher interest rates mean they can’t afford their first choice of dwelling initially, then they will purchase a more affordable type of dwelling and/or in a more affordable neighbourhood.

“In any event, this period will allow future first-home buyers to build up their deposit and take advantage of softer house prices.”

Mr Zigomanis said in the period leading up to variable rates peaking at 9.6 per cent in mid-2008, first-home buyer demand also continued to rise, and peaked at its highest level since 2001/02, when the original First Home Owner’s Grant was introduced.

During this period, first-home buyer demand was aided by strong rent increases, booming economic conditions, and population growth in the 25 to 34 year old age group – the main first-home buyer demographic. BIS Shrapnel says this is again expected to be the case over the next couple of years, with a subsequent pick up in purchaser activity as the recovery in first-home buyers also flows through to upgrader demand.

About Diane Leonard

Diane is the digital marketing manager at Aussie Home Loans. She is a self-professed geek and lover of all things digital. She continues to search high and low for the healthier version of herself, and when she can fit it in, you'll find her preoccupied with her cat - Jez, buzzing around Sydney on her scooter or attempting to learn a new tune on her ukulele.

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